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EQECAT on their new modeling platform and benefits to the catastrophe bond market


EQECAT recently announced that their new catastrophe risk modeling platform, RQE™ (Risk Quantification & Engineering) version 13 would launch in the autumn of 2012. The new RQE V13 platform will replace WORLDCATenterprise™ and is the culmination of three years of work which involved a significant amount of collaboration with their clients, prospects and industry experts as EQECAT worked to create a catastrophe risk modeling platform which was a step-change improvement from their current version and competitors platforms.

Key improvements that EQECAT highlight which will be appreciated by all their users include an enhanced user experience, industry leading change management process, country and peril model updates including hazard, vulnerability, correlation and simulation updates and  improved documentation and training resources to help clients get up to speed quickly.

Find detailed information on what is included in RQE v. 13.

We spoke with Kent David, Vice President of EQECAT’s Consulting Services Group, to get some insight as to their thinking on how the new RQE v13 platform will benefit those within the catastrophe bond and catastrophe risk transfer sectors. We asked him for any insight he could share with our readers on how the platform could improve modeling for catastrophe bond issuances, insurance-linked security portfolio analysis and industry loss warranty (ILW) transactions. Kent provided us with a statement which we include in full below and it does indeed seem that the improvements in this latest risk modeling platform from EQECAT will provide significant benefits to those involved in cat bonds and ILS.

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The RQE platform release does include updates to 77 country/peril models worldwide. As interest in securitizing risk grows, the new platform provides updated views of risk for these updated perils/ regions.

The enhanced financial model will allow EQECAT to more easily address and model the underlying risk in complex portfolios. A robust treatment of uncertainty, correlation, and temporal clustering is represented within the RQE stochastic risk atlas and made accessible in the RQE Year Loss Table (YLT). This will further improve EQECAT’s ability to perform detailed basis risk minimization studies in the design of cat bond triggers. Furthermore, the release of this new output data format will provide a currency for transferring and studying risk in a format that fully captures EQECAT’s treatment of uncertainty, while presenting an opportunity for understanding the impact of time domain features such as aggregate covers, dropdowns, multi-year terms, and the like in a fashion that was previously not directly accessible by users of EQECAT’s products.

The new RQE Stochastic Risk Atlas doubles the number of annual simulations used to represent the risk, from 150,000 to 300,000 years. The increased number of simulations provides further stability and credibility of risk metrics notably in the tail of rated catastrophe bonds. The larger number of simulations allows EQECAT to express the inherent treatment of uncertainty carried through all model calculations.

The new YLT will provide an unparalleled ability to deeply understand risk associated with cat bonds and ILWs. EQECAT’s Industry Loss Databases (ILD) will be available in the YLT format, allowing the analysis of ILWs and catastrophe bonds in a transparent and rigorous fashion. RQE also includes an aggregator that will allow users to aggregate portfolios of instruments with minimal investment in infrastructure or time.

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